Managerial Economics and Strategy, 2/e

Questions

All exercises are available on MyEconLab; $\ast =answer$ [&\*|=|answer&] at the back of this book.

1. Adverse Selection  

1. 1.1 According to the Federal Trade Commission, ­millions of U.S. consumers have been victims of weight-loss frauds, ranging from a tea that promised to help you shed the pounds to fraudulent clinical trials and fat-dissolving injections. Do these frauds illustrate adverse selection or moral hazard?

2. *1.2 The state of California set up its own earthquake insurance program for homeowners. The rates vary by ZIP Code, depending on the proximity of the nearest fault line. However, critics claim that the people who set the rates ignored soil type. Some houses rest on bedrock; others sit on unstable soil. What are the implications ...